Energy bill paves way for Kan exit

The Lower House is set to pass legislation to subsidize renewable energy amid a push to reduce dependence on nuclear power, paving the way for Prime Minister Naoto Kan to quit as early as next week.

The bill requires utilities to buy electricity generated by geothermal, solar and wind sources at above-market rates to stimulate investment in renewable energy, which accounts for 9 percent of Japan's power supply.

Kan called last month for phasing out atomic power.

Passage of the bill marks the last of three legislative goals he set before fulfilling a pledge to resign. His popularity has dropped over his handling of the quake and the Fukushima nuclear crisis. An opposition politician said Thursday the Lower House vote, originally scheduled for Friday, could be delayed.

Introducing the subsidies, known as feed-in tariffs, may help companies like Mitsubishi Heavy Industries Ltd., which makes wind turbines and develops geothermal plants, and solar panel makers Panasonic Corp. and Sharp Corp.

The government aims to increase the size of the renewable energy market to ¥10 trillion by 2020, from about ¥1 trillion in 2009, the Ministry of Economy, Trade and Industry said in 2010.

"The scheme will create a large market in a short time," said Tetsunari Iida, executive director of the Institute for Sustainable Energy Policies in Tokyo. "It will prompt immediate growth of related industries," such as manufacturing and construction.

The other two pieces of legislation are the authorization to sell bonds financing about 40 percent of this year's budget, which cleared the Lower House last week, and last month's enactment of a ¥2 trillion disaster relief package. The bond and energy bills will be voted on in the Upper House next week.

Ichiro Aisawa, Diet affairs chief for the Liberal Democratic Party, said Thursday the Lower House vote on the renewable energy bill is likely to be postponed until next week.

Katsuya Okada, the No. 2 official in the Democratic Party of Japan, said Aug. 11 that the election campaign for a new party leader will begin as soon as the bond and energy legislation are passed. Whoever heads the DPJ becomes prime minister because of the party's Lower House majority.

Nuclear power accounted for about 31 percent of the country's electricity needs before the March 11 catastrophe.

Public support for abandoning nuclear power is growing. Almost 70 percent of respondents in an Asahi Shimbun poll published Aug. 8 said they want Kan's successor to continue his quest to phase out atomic energy.

"This direction won't change" after Kan steps down, DPJ lawmaker Nobumori Otani said. "Japan has clearly shifted gears to promoting renewable energy."

While the legislation will benefit wind and solar power operators, the impact on geothermal power generation is uncertain because of the long lead time to complete projects, said Hideaki Matsui, a senior researcher at the Japan Research Institute. Renewable energy covered in the bill also includes biomass and hydro power.

The success of the feed-in tariff will depend on pricing, analysts say. The bill does not specify how much and how long power suppliers will pay for renewable energy.

"If you set an attractive price, supply of clean energy is sure to increase," as in Europe, said Yugo Nakamura, an analyst for Bloomberg New Energy Finance. "But it is consumers, after all, who shoulder the cost."

Rates for renewable energy except solar will be up to ¥20 per kwh for about 15 years, trade minister Banri Kaieda said in the Diet on July 14.

The rate for solar energy could be higher, in light of a plan introduced in 2009 to buy excess solar power. Currently the tariff for surplus solar power generated by homes is ¥42 per kwh, while power produced by businesses is ¥40.

That compares with the grid electricity price of ¥13.77 per kwh for commercial users, according to data from the Natural Resources and Energy Agency.

The legislation is expected to become law as soon as Aug. 26 and effective next July 1.

Critics of the renewable energy drive include Keidanren, the largest business lobby and which includes power utilities. Lawmakers agreed to revise the legislation to allow heavy power users to receive a discount of 80 percent or more on the feed-in tariffs passed on in electricity bills.

Softbank Corp. Chief Executive Officer Masayoshi Son plans to invest about ¥80 billion to build 10 solar farms if he gets access to transmission networks and agreement from the 10 regional utilities to buy his electricity.

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